Trade License (Živnostenský List) or Company (s.r.o.) ?
Similarities between a trade license and an s.r.o. company
- Both can be used to apply for a Business Visa (although most nationalities only have a realistic chance with an sro),
- In both cases, if you are here as employee and quit your job, the purpose of stay changes, and you will have to apply again for a Business Visa (because the first 2 years it is not possible anymore to change the purpose of stay) or at least change the purpose of stay. (if you are here longer than 2 years)
- In both cases, you do not need a Work Permit - since you are not an employee
- Both can sell goods / services internationally,
- Both can have a turnover of millions,
- Both can have employees on temporary basis or on 'real' contracts,
- In both cases, if your expected turnover is higher than 1.000.000 CZK in 12 months, you are obligated to register for VAT.
Benefits of a trade license
- easier to set up and stop (liquidation (stopping an sro) is a long and expensive process),
- typically lower taxes than being employee or having an sro (more bang for the buck),
- no need for basic capital,
- better suitable for 'one-man' activities,
- accounting is easier than for an sro.
Benefits of an s.r.o.
- A jednatel does not have to be employed at his / her own company,
- A jednatel of an s.r.o. can be his own employee, simplyfing getting health insurance (especially interesting for EU-citizens),
- The chance you will get a Business Visa is bigger (for some nationalities),
- An s.r.o. can have more than one director,
- An s.r.o. can attract external capital in exchange for shares,
- An s.r.o. is able to pay dividends,
- An s.r.o. has a more professional image than 'just a živnostenký list',
- An s.r.o. has limited liability. *
This means that with a živnostenský list you are responsible with your entire private capital,
but with an s.r.o. your liability is only the amount of shares you've put in.
Foundation / Registration CostsThere is a large difference in setup costs:
Registering a živnostensý list costs about 7.500 CZK whereas founding an s.r.o. quickly costs 50.000 CZK. However, for 3rd-Country Nationals, the živnostenský list needs to be re-registered each time the visa expires and an s.r.o. only once.
If you decide to start an s.r.o. from scratch, you'll also need a minimum of 200.000 CZK as basic capital in addition to the founding costs. If you do not have the basic capital, it is clever to consider registering a trade license, instead of buying a ready-made company.
The Alien's Act changed significantly in 2011 which has an impact on everybody getting and extending a business visa. Both trade licenses and sro's need to provide much more paperwork proving the business is really doing something and you make enough money to make a living in Czech Republic.
If you do not make money with your business (or cannot provide for your own living costs), you do not fullfill the purpose of stay (which is doing business) and the visa extended may become very problematic.
Alexio sro foundation / trade license registration servicesAlexio offers a full package of formation / registration services.
We do not only set up businesses, but we help you decide what is best for you and how to set it up.
Further, we will help you with your visa (or residence permit for EU Citizens) and offer accounting and tax services.
We guarantee that if you invest in 1 or 2 hours of consultation, we will be able to answer 99% of your questions and without doubt your start in Czech Republic will be much easier.